£1+ a day Mortgage OP challenge for April

TheWebDev

Whether they really are adding the interest daily, or just displaying the balance with the interest already added is debatable. It doesn't really make any difference which they are doing.

Every time a payment is made, it is first allocated towards paying the interest accrued since the last payment, with any remainder reducing the balance. Therefore there are 2 scenarios:

• The payment is less than the interest charged since the previous payment, and balance remains unaffected. Subsequent payments have less interest to cover before affecting the balance. The daily interest continues being charged at the same rate.

• The payment is more than the interest, and it reduces the balance by the difference of the payment and the accrued interest. The daily interest will reduce accordingly in this case.

Lois_E

Thank you, TheWebDev. That seems a very counter-intuitive way of displaying it - at least it does to somebody like me, whose experience of maths is all scientific rather than financial. I get it now you have explained it to me, but I would never have guessed they did it that way unless, like you, I had data in front of me to analyse. My mortgage only gets the interest added monthly, so I'm grateful to you for explaining.

kittiej

Hi everyone, what a mine of info some of you are - I am perfectly oblivious compared to you

Anyway I have given this a bit of thought and £1.35 a day doesn't seem like such a tall order so I will join if I may please Fairyclicks.

So that makes £40.50 - hmm I need a 30 ways to make £1.35 and a grid to cross off the days of successfully making my £1.35.

I would say ebay but the post office and postage costs are a bind, might be better to cut something out :think:

fairyclicks

kittiej wrote: »

Hi everyone, what a mine of info some of you are - I am perfectly oblivious compared to you

Anyway I have given this a bit of thought and £1.35 a day doesn't seem like such a tall order so I will join if I may please Fairyclicks.

So that makes £40.50 - hmm I need a 30 ways to make £1.35 and a grid to cross off the days of successfully making my £1.35.

I would say ebay but the post office and postage costs are a bind, might be better to cut something out :think:

I'm quite oblivious too, and maths is not a strong point either so I will let the brainboxes do that bit lol! you are very welcome to join us kittiej we can figure out the when to pay bit when we have some to pay

tjp70

All this talk of interest is making my head hurt. I am with Nationwide, I have a spreadsheet that I created to monitor the mortgage and the interest matches the Nationwide. It sounds like I was lucky with my calculations :rotfl:

Lots of eBay listing going on here, especially as DS decided to clear out the large junk cupboard in his room. Just some watchers so far, but it's early days. I have more to list today.

Have a good day.

kittiej

Hi all

I've been thinking about money making opportunities and there was one staring me right in the face!

I have a £5 off a £40 spend at Tesco and a voucher for 48p comparable shopping promo thingy they are doing so that is 4 days right there :T easy peasy and no effort.

Next I plan on going through DH's trouser pockets because I have found the odd fiver sometimes, and then I will have to venture under the bed on his side. Desperate times seek desperate measures and all that :rotfl:He's always dropping money on the floor after dropping his trousers

OK TMI lol.

fairyclicks

kittiej wrote: »

Hi all

I've been thinking about money making opportunities and there was one staring me right in the face!

I have a £5 off a £40 spend at Tesco and a voucher for 48p comparable shopping promo thingy they are doing so that is 4 days right there :T easy peasy and no effort.

Next I plan on going through DH's trouser pockets because I have found the odd fiver sometimes, and then I will have to venture under the bed on his side. Desperate times seek desperate measures and all that :rotfl:He's always dropping money on the floor after dropping his trousers

OK TMI lol.

Yey well done on getting 4 days sorted already and i did laugh at the dropping trousers statement i used to collect all the 1ps and 2ps my OH left all over the house as well as when i was out walking around - we call it roadkill on another thread hehehehe

Well i have been very lucky and had 2 ebay sales so far giving me a lovely £30 to play with am hoping for some more sales tomorrow as well and to get to a car bootie if i can get my car going -(battery is dead atm ) then that awful task of deciding what to do with the dosh unfortunately it can't all come off the mortgage!

TheWebDev

I hope I didn't come across as trying to discourage anyone from joining in this challenge. That was not my intention. I only wanted to point out that making an overpayment everyday is not particularly efficient at saving interest on a mortgage.

If the amount that you can afford to overpay each day is less than the daily interest (assuming your bank calculates it daily), then it will be no less efficient waiting to make the overpayment on the day of the regular payment. This means you could take advantage of using a savings account to earn a few days interest on your overpayments.

I would like to encourage people to try a slightly different strategy. Instead of saying "I'm not going to eat that chocolate bar today, I'll overpay my mortgage by £1 instead", I'd like people to consider saying "I'm not going to eat those chocolate bars this coming week, I'll overpay my mortgage by £7 today instead".

The reason for this is simple. Whenever you make a payment (or overpayment) on a mortgage, the money is first used to pay off the outstanding interest. Only after this has been cleared does the balance reduce (along with future daily interest). Therefore the earlier you make the payment, the less interest needs to be repaid, before the balance is reduced.

An example would probably help illustrate this better, so I'll use the £2.50 per day payment and £2.47 interest per day that fairyclicks gave earlier in the thread. I'll assume 30 days per month and an interest rate of 3.65% as I don't know what it really is, and this works out at 0.01% per day.

• pay £2.50 every day, balance is reduced by 3p every day and saves 0.135p (takes 7 months to save 1p)
• pay £5.00 every other day, balance is reduced by 6p every other day, but is always £2.50 less than paying daily. This saves 0.885p (takes 11 months to save 10p)
• pay £12.50 every 5 days, balance is reduced by 15p every 5 days, but is always £10.00 less than paying daily. This saves 3.135p (takes 3 months to save 10p)
• pay £75.00 every month, balance doesn't reduce during the month. This saves 22.5p (9 months to save £2)

The savings shown are based on paying on day 1 of the respective period, and only take into account what is saved during the month that the overpayments are made. This means that they represent additional saving compared to waiting until the end of the month to make the overpayment.

Please be aware that overpaying on a daily basis will only give you a benefit during the month of overpayment if you cover the daily interest, whereas overpaying on the same day as the regular payment will always give you the maximum benefit.

The later in a month that you make an overpayment the less benefit it will provide. (If you make your regular payment on the 16th, then months start on the 16th and end on the 15th.)

tjp70

Happy Easter everyone.

I listed one item as Buy It Now as it was some printer cartridges for a printer I no longer own and it sold yesterday :j

I did offer free postage so I have no idea what the net profit is yet, but, for me, it's a great start.

Long may it continue.

elantan

Thanks dave that has been a great explanation I think I will continue to put my overpayments into a saving account and just transfer once a week/ fortnight that way the money will work that wee bit harder for me


Quick q ... Would I be better making my overpayments on the same day as my regular payment comes out? In the sense that I try and overpay mortgage 1 by £500 a month I tend to do this on the first but my regular payment comes out on the 20th ... Would I be better paying the £500 on the 20th?

With my second mortgage I am just chucking Tilly tidies and any spare at so was going to pay that once a week/ fortnight as it isn't going to be much

Which is the best way to get the most from my payments ?

Thanks